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A Cautionary Tale of Regulating Corporate Human Rights Abuses

Stéfanie Khoury & David Whyte, University of Liverpool (UK)

The impact of the OECD Guidelines on Multinational Enterprises, a little-used regulatory mechanism designed to provide redress for corporate abuses of human rights.

The UN Human Rights Council (HRC) is currently developing a legally binding instrument on the human rights responsibilities of corporations.  In its deliberations, the HRC can draw lessons from the record of the Organisation of Economic Co-operation and Development (OECD) on this issue.  Under the OECD ‘Guidelines’, member states are obliged to set up National Contact Points (NCPs) responsible for addressing issues of implementation in specific instances of human rights violations. 

By far the largest single category of cases reviewed by NCPs relate to human rights abuses.

The Guidelines cover a wide range of standards of conduct that corporations are expected to comply with, including: human rights standards; employment and industrial relations; and environmental protection.  By far the largest single category of cases reviewed by NCPs relate to human rights abuses, and almost all such complaints are made by two types of ‘civil society’ organisations: NGOs and trade unions.  Those organisations compile detailed data on the outcome of their cases.  It is this data that we analyse here in order to understand something about the OECD process.

The following table shows the trend in the use of the OECD process over the past 14 years.[1] 

Figure 1. Cases initiated by NGOs and trade unions (August 2002-2016)   

The outcomes of all 403 cases from Figure 1 are set out in Figure 2 below.

 Figure 2. The impact of cases brought to NCPs under the ‘Guidelines’ (August 2002-2016)

Since the largest category of outcomes is ‘Concluded or Withdrawn’, we are given the initial impression that almost half of all cases are resolved in some way: they have either reached the end of the process or have been withdrawn by the complainant.

To establish if this impression that around half of cases are resolved was accurate, we systematically categorised those cases. Following the more detailed analysis of these 191 ‘Concluded or Withdrawn’ cases, we found that a total of 49 yielded a mutually agreed outcome where both the corporation and the complainant came to a mutually satisfactory settlement. We also found within this category of ‘Concluded or Withdrawn’ cases, 10 that were partially resolved (i.e. cases where a significant part of the complaint was unresolved), 13 resolved by a separate process (e.g. a separate legal procedure), and 5 concluded due to external factors in the dispute between the parties (e.g. corporations ceasing operations in that country).  In a total of 102 cases, however, we found that one or more parties in the case were not satisfied with outcome. 

Only 49 from our 191 cases in this category were resolved to the satisfaction of both parties.

In other words, in the large majority of cases that were Concluded or Withdrawn, the process had not reached a mutually satisfactory outcome.   Only 49 from our 191 cases in this category were resolved to the satisfaction of both parties.  If we take this as a global proportion of all cases we analysed, then approximately 1 in 8 of the total number of 403 cases reached an outcome that satisfied both the corporation and the complainant.  Counted as an annual total this equates to around 3-4 cases per year.

In scrutinising the detail of those cases, we found a series of blockages in the system that prevented a mutually satisfactory conclusion. Our analysis identified four major weaknesses within the ‘Guidelines’ rooted in its ‘voluntary’ characteristics. Firstly, companies often refuse to engage with NCPs. Secondly, NCPs often display a lack of political will to intervene in ways that challenge corporations. Thirdly, even if there was a clearer political will, NCPs cannot oblige or coerce companies to participate in the process. Finally, given the lack of accountability for decisions made by NCPs, there is no adequate redress for complainants. These blockages point to a fundamental asymmetry of power, in which complainants remain structurally disadvantaged in the process.

Any mechanism negotiated to address corporate violations of human rights would need to take account of the failures and shortcomings of the NCP system.

Our findings indicate very clearly that those blockages have rendered the NCP process largely ineffective and capable of dealing with only a token number of cases each year.

The evidence set out here therefore provides a cautionary tale for the UN HRC’s 2014 Resolution for an international legally binding instrument on the human rights responsibilities of corporations (A/HRC/26/ L.22/Rev.1), and forewarns that any mechanism negotiated to address corporate violations of human rights would need to take account of the failures and shortcomings of the NCP system.  Without the credible threat of meaningful enforcement, corporations remain empowered to either ignore or deliberately undermine processes such as the OECD Guidelines.

The findings set out here are analysed in more detail in ‘Corporate Human Rights Violations’, a new book by Stéfanie Khoury and David Whyte published by Routledge in March.

  


[1] Our analysis was delimited to cases from August 2002 to August 2016. For this reason, the number of cases for the years 2002 and 2016 do not take into account the total number of cases for these years but only cases from August to January and January to August, respectively.